U.S. Election Impact on Environmentally Material Sectors: A Study of Market Responses in Energy, Utilities, Non-Energy Materials, and Industrials

Abstract

This thesis examines how the re-election of Donald Trump in 2024 influenced stock market valuations in the U.S. energy, utilities, materials, and industrial sectors, focusing on firms classified as either “green” or “brown” according to their environmental orientation. The central research question is whether the financial market response to deregulatory political leadership has changed between 2016 and 2024. Using a comparative event study design, the analysis tests whether investor reactions to Trump’s initial election in 2016 and his return in 2024 differed in magnitude and direction. Results show that Trump’s 2024 re-election triggered significant negative abnormal returns across environmentally sensitive sectors, with green firms experiencing steeper losses than brown firms. Notably, the gap in abnormal returns between green and brown firms was smaller in 2024 than in 2016, consistent with a learning effect as investors adapt to recurring policy shocks. These findings advance the literature on ESG risk pricing and political finance by demonstrating that while ESG factors remain financially material, market sensitivity to policy risk evolves with experience. The study offers practical implications for investors and policymakers concerned with transition risk and the financial impact of political cycles on sustainability-oriented firms.